Q4 2024 TrueCar Inc Earnings Call
Speaker Change: Good day and welcome to the TrueCar 4th Quarter 2024 Financial Results Conference Call.
Speaker Change: Please note this event is being recorded. I would now like to turn the conference over to Jantoon Reigersman, President and Chief Executive Officer of Trucar. Please go ahead.
Speaker Change: Thank you, operator. Hello, everyone, and welcome to the Truecars fourth quarter 2024 earnings conference call. Joining me today is Oliver Fowley, our Chief Financial Officer.
Speaker Change: Before we get started, I need to read our exciting safe harbor. I want to remind you that we will be making forward-looking statements on this goal, including statements regarding our revenue growth, expected adjusted EBITDA, and free cash flow, as well as aspirational goals regarding 2026 revenue and free cash flow margins.
Speaker Change: Forward-looking statements can be identified by the use of words such as believe, expect, plan, target, anticipate, become, seek, will, intend, confident, and similar expressions.
Speaker Change: and are not and should not be relied on as guarantees of future performance or results.
Speaker Change: Actual results could differ materially from those contemplated by our forward-looking statements. We caution you to review the risk factors section
Speaker Change: of our annual report on Form 10-K, our quarterly reports on Form 10-Q and our other reports and filings with the Security and Exchange Commission for a discussion of the factors that could cause our results to differ materially.
Speaker Change: The forward-looking statements we make on the score are based on information available to us as of today's date.
Speaker Change: and we disclaim any obligation to update any forward-looking statements except as required by law.
Speaker Change: <unk> stock of where we are relative to where where we were and where we are expected to be allows us to evaluate what is working and not working and adjust course accordingly.
Speaker Change: To that end, let us start with a year on year over year comparison over awesome 'twenty 'twenty four financial performance and operational Kpis.
Speaker Change: Revenue of $175 6 million grew by 16.9 million or 10, 6% year over year, the strongest annual revenue growth since 2017.
Speaker Change: Adjusted EBITDA of $1 6 million grew by 15 points.
Speaker Change: Oh again year over year.
Speaker Change: Cash flow from operations of 7.7 million represents a year over year improvement of 31 million.
Speaker Change: Free cash flow of negative <unk> 2 million, representing a year over year improvement of $34 1 million total unit sales of 350 at 56000 increased by 37, 3000 or 11.7% year over year.
Speaker Change: New vehicle unit sales of 204000 increased by 27.5 thousand or 15.6 year over year.
Speaker Change: <unk> dealer count grew by 119 dealers ending the year at 8351.
Speaker Change: A one 4% year over year increase.
Speaker Change: With the by the launch of T. C blocks, we became the first and only digital marketplace to enable the purchase of <unk>.
Phil: And Phil you used in certified preowned vehicles throughout through an entirely online transaction.
Phil: The rollout of Truecar 12 months dealer service program.
Phil: And we repurchased a total of $6 1 million shares of Truecar stock.
Phil: Moreover, we finished the year with momentum and strength across many of the areas in the business as highlighted by several of the Q4 performance metrics.
Phil: Revenue of $446 2 million, an increase of 11, 9% year over year with positive adjusted EBITDA of 0.4 million and cash flow from operations of $5 9 million in free cash flow of $4 1 million, an increase of 12.2 million year over year.
Phil: Our ending rooftop balance was three rooftops hired in prior year, making the first year of rooftop growth since 2019.
Phil: Total units sold 93000 increased by 22% year over year and new units of 58000 increased by 27, 8% year over year.
Phil: In summary, we finished the year by delivering yet another quarter of double digit revenue growth and positive adjusted EBITDA and achieved our goal of generating positive free cash flow in Q4.
Phil: Moreover, the intense focus we placed during the year on efficiently growing new unit sales and capturing greater share of new car shoppers showed tremendous results in Q4, as we delivered 27, 8% new unit growth in the quarter year over year.
Phil: Significantly higher than the industry's nine 6% growth.
Phil: As such in Q4 2024, the average franchise dealer on Truecar, So new vehicle sales generated through our marketplace grow by 27, 1% versus the same period last year reached.
Phil: Reaching the highest level since Q3 2021.
Phil: We also continued making progress on TC blast during Q4, as we articulated last quarter. Our Q4 focus for TC blouse was two one expand the D. SNP loss purchasing experience to consumers shopping on select affinity partner sites to integrate AI powered for potential.
Phil: Prevention tools into the buying process to more effectively detect and mitigate the risk of consumer fraud, and three deepen our integration with select dealer management systems also called Dms.
Phil: Providers in order to further automate and streamline the buying process for dealers. During Q4, we introduced D C plus and several of our affinity partner sites.
Phil: Further upper funnel optimizations that have contributed to a nearly 50% increase in the average number of consumers initiating the T. C block purchase experience each month, and then a similar increase in transaction volume.
Phil: With the work to enhance fraud detection recently completed we expect to enable D. C plus one additional partner sites, Inc. In Q1, while maintaining a focus on controlled approach to expand consumer access to T. C. Plus it allows us to test and iterate. Furthermore, we expect that expanding access to tissue bustle will be done in tandem with expanding the D. C pulse pilot two <unk>.
Phil: <unk> dealers, which we plan to prioritize upon the completion of the work we began in Q4 to deepen our Dms integrations.
Phil: 2024 wells a year of great progress for Truecar with nearly every measure of performance improving from the prior year and several long term growth initiatives are being brought to market.
Phil: We are proud of what the team has accomplished in the year and we're even more hungry to accelerate our progress in 2025, we firmly believe that the quality of our assets and the unique competitive strengths should yield sustainable annual revenue growth of 20% plus in a normalized new vehicle retail.
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Phil: To unlock that growth opportunity, we must stay committed to the following building blocks, we have previously outlined while simultaneously strengthening our execution against them.
Phil: Juan continue activating new franchise dealers to minimize dealer churn three grow revenue per dealer and four continue expanding our OEM business.
Phil: The expansion and commercialization of D. C plus continues to be a top priority for Truecar in 2025. Following the completion of the work currently underway to deepen our integration with Dms providers and automate nearly every step of the selling process for dealers, we anticipate rapidly expanding the pilot to additional dealers and territories.
Phil: In conjunction with adding dealers in inventory through the program, we intend to make the to see plus experience more broadly available to consumer shopping on their branded.
Phil: And affinity partner sites.
Phil: Lastly, and as we discussed last quarter, we made significant investments during the second half of 'twenty 'twenty four two and enhance our data platform to enable the rapid development and deployment of our new generative AI and machine learning models that enrich the consumer shopping experience and provide dealers with value enhancing features and insight.
Phil: In partnership with AWS Truecar has established a real time ml platform through which we can quickly build and deploy modular continuous and traceable AI ml models that leverage our first our rich first party data sets in Q1 of 2025, we launched the first of these models, which classifies consumer leads.
Phil: Based on their propensity to purchase with a high degree of accuracy.
Phil: We foresee a number of ways. This predictive model can be leveraged across a range of use cases, such as empowering because there's such as powering marketing campaign optimization and providing dealers with enhanced consumer insights that further improve lead conversion rates.
Phil: With these enhanced capabilities, we expect to be able to retain more shoppers on the site and effectively retarget them through tailored email engagement that will ultimately allow us to capture a greater share of car buyers and drive high quality leads to our dealer network.
Phil: As such leveraging these recent investments in our <unk> and our data platform and prioritizing high impact use cases like the ones described above is a top priority for of ours in 2025, and we believe can own lock significant value that can further accelerate growth of our core business.
Phil: Yeah.
Phil: Turning now to walk through our outlook for 2025, our expectations for the business. This year are rooted in our belief that we are a much stronger organization today than at this point last year not only has the value we're delivering for our customers is stronger than it has been in years, but are even more focused and determined.
Phil: And to execute against the building blocks that we that we believe will enable us to achieve our targets of 20% plus year over year revenue growth.
Phil: However, unlocking this growth potential not only require strong execution, but the willingness to make key investments that will accelerate the growth of our dealer network unit sales in OEM partnerships and deepen the penetration of our expanded product offering.
Phil: The primary investment we're making in Q1 are the additional head count on our dealer sales and service teams, which we expect will enable us to grow our dealer network by accelerating the pace at which we add new dealers and strengthening our ability to effectively retain them through our best in class service as.
Phil: As well as the expansion of some of our marketing efforts with.
Phil: With strong management of processes in place, we're confident that this investment will yield a strong ROI in 2025, and maximize our ability to deliver accelerated year over year revenue growth in the second half of the year, while also delivering fully adjusted EBITDA profitability and breakeven free gaslog.
Phil: However, given the ramp time associated with these headcount additions as well as the near term impact to OEM revenue associated with the transition and incentives.
Phil: American Express and also new affinity partners, we expect modest Q1 revenue growth in the high single digits and negative adjusted EBITDA of approximately $5 million.
Phil: That said our outlook for growing OEM incentive revenue. In addition to core dealer revenue in Q2 to Q4 remains strong due in part to the recent enablement of Mercedes incentives to validate two validated a AAA members nationwide.
Our program, we're optimistic about with early performance tracking in line with what we observed when we launched our former partnership with American Express.
Phil: We're also actively working to expand this program by bringing additional OEM partners on board.
Phil: Given the strength of these partnerships and the momentum we're building by investing in head count. We expect every reacceleration of revenue growth in Q2.
Phil: We firmly believe that the opportunity before us warrants to near term investments and will enable us to deliver the strongest growth outcome for the business in 2025. Moreover, we maintain our ambitious targets to return the business to an annual revenue run rate of 300 million and 10% free cash flow margin by the end of 2020.
Phil: Thanks.
Phil: Maintaining this target is rooted in our belief that our growth rate exiting 'twenty 'twenty five can have us on the trajectory required to achieve these marks.
Speaker Change: Now operator, let's open the call up for questions from our analysts.
Phil: Thank you.
Speaker Change: I will begin the question and answer session.
Speaker Change: Ask a question you May press Star then one on your Touchtone phone.
Speaker Change: If youre using a speakerphone please pick up your handset before pressing the keys.
Speaker Change: If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.
The first question comes from Rajat Gupta from Jpmorgan. Please go ahead.
Speaker Change: Great.
The question.
Speaker Change: One question just on.
Speaker Change: The first quarter guidance.
Speaker Change: The step up in expenses.
Speaker Change: Could you elaborate a bit more on you know.
Speaker Change: What specific areas are you targeting I know you mentioned it seems like it's more sales and marketing related but is there also some technology related spending that's picking up and what wouldn't get what's giving you the confidence or or maybe what are you seeing in terms of just line of sight.
Speaker Change: That it's going to immediately to help accelerate revenue growth in the second half of the year and I have a quick follow up thanks.
Speaker Change: Yeah, absolutely let me Yeah, let me start and over you can you can add to that so I think there are a couple of things so.
Hum.
Speaker Change: Predominantly it's boots on the ground. So we see the need the help the dealers need and our ability to have boots on the ground knock on the doors really provide them with.
Speaker Change: The help weekend provide them to sell more cars.
Speaker Change: It's something that we're very good at and that the sales team has proven to be very efficient at and so it's really a focus on making sure. We can drive the sales on that side and that just requires more head count number one number two on the marketing side, we've become much more efficient on the marketing side.
Speaker Change: We continue to become more efficient.
Speaker Change: We're more focused and so we also feel that it warms further investments historically, we've probably taken a little bit too much oxygen out of the room and would like to start deploying more and we feel that the market is really having some element of a turning point, where we can lean in more.
Speaker Change: Because we know that on the core dealer side, we have a really good market fit and we would just want to keep pushing that there is some modest technology advancements that we're making obviously in the magenta AI side and the corporations, we're doing there as well, but those are smaller compared to the two obviously the head count charge and the marketing side.
Oliver Fowley: Oliver I didn't know if there's anything you want to add there yeah. The only thing I'd add is obviously Q1 is as you know.
Speaker Change: Seasonally.
Speaker Change: Quarter with with higher specifically payroll related expenses.
Speaker Change: But when we think about those.
Speaker Change: The increase is driven by near term investments, it's almost entirely.
Speaker Change: Dealer sales and dealer service head count and the reason, we feel confident investing in those two areas is because we restructured the sales and service team at the end of 2023 brought in new management, we created new processes and we've really focused on how we can drive sales productivity and <unk>.
Speaker Change: Over the course of the year, we really saw strong improvements in the dealer sales teams productivity across the board really every measure.
Speaker Change: And Q4 was a really strong quarter in that regard and so we feel like we've got the team in place or the management in place the processes are much stronger than they have been in the past.
Speaker Change: And right now just a matter of having the right regional coverage across all of our territories to make sure. We're we're tapping into all of the enacted dealers.
Speaker Change: Out there today, and then and then secondly on the dealer service side. It was in Q2, we launched 12 months service plan and our hypothesis. There was that if we can be highly consultative with our our dealers in every month sort of.
Speaker Change: Work with them on driving or maximizing their performance on the platform. Our hypothesis was that we would see a significant decrease in churn and.
Speaker Change: In the fourth quarter, we really started to see.
Speaker Change: Sort of the results of that and so it validated that hypothesis in many in many ways and so we believe that.
Speaker Change: Expanding the size of that team. So that you know all dealers can get that consultation every month ultimately that's what's going to drive.
Speaker Change: Churn down to our long term target in 2025, so that's why we feel confident investing in both those sides of the business.
Speaker Change: Got it got it that's helpful color.
Speaker Change: Just wanted to follow up on the Dms integration with Truecar plus.
Speaker Change: You.
Speaker Change: Can you give us some more details on that in terms of.
Speaker Change: What are the steps that are involved.
Speaker Change: And that integration what phase are you in in terms of integration.
Speaker Change: No it is.
Speaker Change: Dms, plus Truecar plus platform live already.
Speaker Change: We are in that process and when do you expect it to really start to contribute more meaningfully.
Speaker Change: No I'm just in terms of like conditions.
Speaker Change: But just in terms of monetization as well thanks.
Speaker Change: Yeah. So the answer to that on the Dms side is relatively straightforward so were.
Speaker Change: There are obviously several dms providers in the country.
Speaker Change: One of them is obviously very large and so we're integrating with them initially which is CDK and so the the.
Speaker Change: The idea is historically.
Speaker Change: Dealers have not been able to modify the paperwork as easily and obviously in this trend and then this online transaction, we want to be able to have a flow where the dealers really only need to just approve and don't need to do any further work on the documentation because everything has already been pre calculated an and.
Speaker Change: Is already Penny perfect and so in order for that to happen you need to be obviously on the roadmap. It takes some time their durations. There are always certain box that are inside and so as we continue that work, it's a matter of right and having both organizations being aligned in the interim we're also integrating with other dms providers were dizzy.
Speaker Change: Integrations are probably a little bit easier because.
Speaker Change: These are built for a little bit more futuristic architecture as opposed to some of the longer term Dms providers, who have always had been and have historically been built that's effectively on a different type of letter system. So all in all it's really a matter of a keep keep pushing this in terms of.
Speaker Change: The road map of all the various third parties.
Speaker Change: And we're already fully transacting now, it's just really the differences.
Speaker Change: You, sometimes if there's a if a consumer in the last minute wants to change something it's a dry you. It requires the dealer to still go in manually at times to finalize some components of the paperwork and we want to make sure that that's fully automated so there's really no burden on the dealer and that's obviously really important requirement.
Speaker Change: As we start scaling because the more in further re skilled the fewer we wanted to be a manual tasks for the dealers. So that was really the trade off we were making which as we know we have a lot of dealer said would love to be on the program.
Speaker Change: We obviously want them to be on the program, but we want to make it as little manual supposal for them and so and it and given we're so so near to finalizing these different pieces. We've we've really wanted to do that sequentially and then in terms of the financial contribution of D. C plus remember that a lot of.
Speaker Change: This will be part of obviously of the subscription services off the dealer show as soon as we start ramping and having bigger volumes and then over time you can start seeing this I think this will become more meaningful obviously next year and this year, it's really about proving units unit volume proven experience.
Speaker Change: Becoming a larger size of the overall revenue of the individual dealerships are on and then expanding inventory and dealers on that and it's really the monetization should then fall next year in terms of real contribution.
Speaker Change: Got it got it that's helpful. Thanks for the color and good luck.
David <unk>: The next question comes from David <unk> from B Riley Securities. Please go ahead.
Ryan Powell: Hi, great. Good morning, Thanks for taking my question. This is Ryan Powell on for Nevada.
David <unk>: So first I wanted to ask about.
David <unk>: So over the past few years franchise dealers have been trending up whereas independent dealers have seen greater churn.
David <unk>: I was wondering if we should expect as trying to continue into 2025, and then also how the.
David <unk>: 12 month dealer service program should impact each group and then also.
David <unk>: Just want some more color on the.
David <unk>: The total opportunity for.
David <unk>: Adding new affinity partners. Thank you.
David <unk>: Yeah. So.
Speaker Change: Let me I'll start and then Oliver Ken can jump in so the answer is yes, obviously, we're we skew more new and we skew more franchise compared to many of our competitors.
David <unk>: So that has been a focus of ours and will remain a focus of ours.
Speaker Change: Obviously a driving.
Our new franchise activation is a really important business driver for US right. It's the first building block that I articulated earlier.
Speaker Change:
Speaker Change: And then on the churn side. Similarly franchises, obviously is an important driver, but solar independence, but I think what's really important is to understand that not every independent is equal. So there are large but we have very large independents are customers who are really.
Speaker Change: As valuable and important customers.
Speaker Change: Customers of ours, but we also have a very large long tail of much smaller independents and smaller independents, obviously struggle much more in a high interest rate environment and in an environment, where used car prices are still very very high and so it's hard for them to do.
Speaker Change: Get inventory, it's hard for them to finance inventory, it's hard for them to to get the right clients on their lots and those are often smaller dealerships had uneven run like back end of your EBITDA.
Speaker Change: Your P systems et cetera, so and the churn on the independent side and if you look at the broader numbers, it's always a little bit misleading because you you sure like very diverse churn happening, but as long as that happens on the long tail.
Speaker Change: It's not as impactful and it's not as important.
Speaker Change: Well, we really are focused on is obviously, our big clients all across the board and the same applies to our 12 month service cycle. So what happens is.
Speaker Change: We're obviously very focused on the franchises and the larger independents, we have created a separate program for small independents.
Speaker Change: Where it's a little bit of a lighter touch point. We obviously there is an important consideration of ROI is one of the reasons why we're obviously investing also in in frankly in sales and service people because it's really important when you do service to do it in person to spend the time to to really work with.
Speaker Change: Your clients.
Speaker Change: And we've seen that that has tremendous impact mitigating churn, but also adding dealers at all and so we feel that the the opportunity is ripe for us to do further investments there. So over time, you should see the churn rates come down even though on the independent side.
Speaker Change: Robert Lee as the current macro persist they will probably stay somewhat elevated for the time being but that's all in the long tail at the end of the day and so and what we really focus on those obviously the dealers and bringing the highest revenue per dealer and then remind me what your last question was on the affinity side.
Speaker Change: Yes, just how you're sizing the entire kind of opportunity there with adding new partners.
Speaker Change: Yeah, I think the the affinity side is huge right in and where were words like we've proven a very efficient product market fit on that side of the business.
Speaker Change: And it's really the triangulation or actually I should actually you said that you had the triangulation between four parties, which is the affinity parties, the Oems dealers and off and so if you do that well, we obviously run very efficient programs and we're clearly one of the few that run that in the in the marketplace.
Speaker Change: Or at the very least to run it so effectively.
Speaker Change: We think that there are a lot of affinity.
Speaker Change: Our partner so we can add further onto the platform, it's a really big priority of ours.
Speaker Change:
Speaker Change: But we also want to do that while obviously, providing will return an attractive platform for the affinity partners that we have but we think that this is a place where we can scale a lot in and obviously if you look at our units. Even it's obviously also a really important source of our broader traffic and those are often highly intense.
Buyers in the flow so not only from a core perspective are they really important but also long term from a D C plus perspective, they're very attractive.
Speaker Change: Consumers for hours and then the other thing that's also becomes very interesting and at TC Plows World in the future is the opportunity that you can really start.
Speaker Change: Adding more value added services, especially to affinity said, our membership base, where you can start thinking about ownership of the car and long term opportunities around our two re targeting opportunities et cetera. So the affinity OEM side is an important driver for us across the board both in the core side and long term also on the <unk>.
Speaker Change: Supply side.
Speaker Change: Thanks, Dan to Super helpful.
Speaker Change: The next question comes from Ryan Meyers from Lake Street Capital markets. Please go ahead.
Ryan Meyers: Hi, Thanks for taking my question just wanted to get some more color on the EBITDA guide for Q1. So does that include any sort of an impact from the wholesale business that obviously has kind of weighed on the gross margin in the past couple of quarters or do you expect to see.
Ryan Meyers: Gross margins rebounded in Q1 and most of that is just going to be coming on the head count that you guys are adding.
Ryan Meyers: Yes.
Ryan Meyers: Don't expect wholesale to.
Ryan Meyers: To have.
Ryan Meyers: Any significant impact on Q1, that's not really a growth driver of ours.
Ryan Meyers: And so when you think about gross margin.
Ryan Meyers: You know, what's what's dragged it down in the last couple of quarters.
Ryan Meyers: Part of wholesale, but I'd say just as much as it is.
Ryan Meyers: Truecar marketing solutions.
Ryan Meyers: Truecar marketing solutions.
Ryan Meyers: The marketing dollars that we deploy those campaigns get captured in cost of revenue.
Ryan Meyers: But when you think about operating contribution it's actually yeah.
Fairly comparable to the core auto buying program.
Ryan Meyers: And so as we think about the trend in gross margin, it's really going to be yes.
Ryan Meyers: Driven by.
Ryan Meyers: The makeup of our total revenue so as as OEM revenue starts to accelerate.
Ryan Meyers: Benefits gross margin.
Ryan Meyers: If T CNS, our trigger marketing.
Ryan Meyers: Solutions.
Ryan Meyers: We're too.
Ryan Meyers: Grow substantially over the next couple of quarters that could in theory bring down.
Ryan Meyers: Our gross margin, but you would expect operating contribution to.
Ryan Meyers: To be materially the same as it would be if it was the core dealer business that was driving that growth.
Ryan Meyers: So looking at Q1 really what's impacting that that guide is really just.
Ryan Meyers: The seasonal nature.
Ryan Meyers: Payroll and related costs being higher in Q1, and then the incremental sales and service head count, which it just it takes time to ramp those hires up.
Ryan Meyers: But no.
Ryan Meyers: Effective dealer sales people have a pretty quick.
Ryan Meyers: Payback period. So that's why we've we've you know our expectation is that you start to see the reacceleration of revenue growth.
Ryan Meyers: In Q2.
Ryan Meyers: Okay got it and then primarily just the biggest thing that impacted the first quarter revenue was just the loss of American Express and then obviously with the with the hires in the remaining quarters and then you know you called out the Mercedes business I'm AAA grocery reaccelerate, but really the biggest driver of the growth rate in the first quarter is just the last one.
Ryan Meyers: Can express platform.
Ryan Meyers: That's correct yes.
Ryan Meyers: Any other OEM program, you know when you introduce it to a new affinity partner it takes time for that to ramp up.
Ryan Meyers: And.
Ryan Meyers: It just requires marketing it to that membership audience.
Ryan Meyers: I'm aware of it and over time it starts to build steam and that's what we saw with with American Express and sort of add up.
Ryan Meyers: A pretty gradual build but then accelerated fairly quickly after a few months. So Q1 is where sort of bridging that gap.
Ryan Meyers: With the lawsuit.
Ryan Meyers: American Express.
Ryan Meyers: Okay got it thanks guys.
The next question comes from Tom White from D. A Davidson. Please go ahead.
Tom White: Great. Good morning, Thanks for taking my questions. Two if I could I guess first one is just sort of a high level one on kind of your discussions with dealers. It seems like you know dealerships are all kind of dealing with this profit normalization kind of evolution.
Ryan Meyers: After a few kind.
Ryan Meyers: Kind of years of outsized profitability for dealerships so.
Ryan Meyers: So it would seem that maybe you know some are looking to like cut from tech and marketing budgets kind of in the face of that but then on the other hand in a maybe they arguably need.
Ryan Meyers: Platforms like yours, more so than ever.
Ryan Meyers: You know to kind of get incremental consumer demand. So just kind of curious like how did you have discussions with dealers are going kind of.
Speaker Change: And how you kind of navigate those two sort of different forces and then I have a follow up thanks.
Ryan Meyers: Yeah.
Ryan Meyers: Good question and the answer is you're you're spot on and I think that the they're there and I think there's an added nuance there that it really depends also on the size of the dealership and the level of sophistication of the dealerships so right.
Plenty of dealers right now think okay. That's cut back on on any of the marketing services effectively and then put more to Google very quickly they learn debts as they do that and deploy more on Google the Google only shows like their top two or 3% of their inventory and the other 97 or 98%.
Ryan Meyers: <unk> does not get any views and so very quickly then they end up with aging inventory and N.
Ryan Meyers: And then they they call back and say Oh, we have a problem and so so it's also the reason why we have.
Ryan Meyers: Redesigned the service program to this 12 month program to Oliver was referring to that we started in Q2 and.
Ryan Meyers: That's really much more of a direct engagement, where every dealer has its own subset of issues because it depends on whether you're bicoastal depends on whether you're in the middle of the country depends on whether you are in a larger city or smaller city and so everybody has their own nuances.
Ryan Meyers: But also don't forget that there is another really important drive for that people underestimate that the service team that does a really good job off which is training the dealers. So yes. The dealer has to kind of readjust to the to the margin compression as it were.
Ryan Meyers: Also dealers often are struggling with the sales team that frankly had a really good life over the last couple of years and now has to go back to actual like heart selling.
Ryan Meyers: And many of their their sales team don't know or don't remember actually how to appropriately sell the way they had to and used to and so helping the dealerships with training of their staff with providing them insights with the tools and providing them insights with all the different all the different tools that we have.
Ryan Meyers: Has allows the dealers to be much more efficient and that even goes is as simple as right. We have dealers, where they're not actually selling as much and then we go and look into the system and we have a person inside the dealership and they actually look at how their pricing and if they work to price the car.
Ryan Meyers: 50, or 100 box in a different direction did actually immediately that the amount of leads.
Ryan Meyers: Expense disproportionately and so and suddenly they're selling many more cars just because they are much more active and thoughtful in the way they are actually setting their prices in and engaging with those leads so theres a lot of training associated with this which is why we're doing more of the servicing is a.
Ryan Meyers: In that program.
Ryan Meyers: But that's really the attention that there is and so.
Ryan Meyers: And it's really allowed us to make sure that we show the value we can provide to them so becoming more sophisticated in the way, we articulate that and show them. The reports of how they can improve is a very important part of our servicing efforts.
Ryan Meyers: Okay. That's.
Ryan Meyers: That's interesting. Thank you and then just.
Ryan Meyers: One last one on kind of the OEM incentive revenue line.
Ryan Meyers: I'm just curious whether you know as you think about like the multi year runway.
Ryan Meyers: There is there any reason like sort of structural reason why you know.
Ryan Meyers: You wouldn't be able to make kind of meaningful strides kind of getting that revenue line back to kind of where it was pre pandemic levels.
Ryan Meyers: Or is there any risk that.
Ryan Meyers: You know that in.
Ryan Meyers: In the years since you had a more meaningful revenue base there that.
Ryan Meyers: You know theres been some kind of change in the way Oems either approach the channel or you know they've shifted budgets elsewhere. When it comes to kind of a digital.
Ryan Meyers: Digital marketing in this way I realize it's not exactly a digital marketing and a type ad.
Ryan Meyers: AD budget necessarily but.
Ryan Meyers: I'm just curious like when you're when you're thinking about that 300 million annualized like kind of longer term target like how.
Ryan Meyers: How realistic is it that you know this is gonna be a yeah, a big big driver of it.
Ryan Meyers: Yeah.
Ryan Meyers: I think it is I think there is plenty of opportunity and I think we should be able to grow beyond to what it used to be.
Ryan Meyers: I think we prove to the Oems our effectiveness I also agree with you that obviously because they historically if pulled back budgets from frankly every program that kind of.
Ryan Meyers: Need to normalize to reallocate and I think we did a good job in the letter trying to explain how to think about the OEM incentives right really if you over simplified a little bit there effectively two tools that the Oems have which is financing our captive incentives right. So what is the what is the.
Ryan Meyers: All four they give you.
Ryan Meyers: Effectively from the lending side to make the car more attractive than in the other one is like the cash on the Hood.
Ryan Meyers: Type incentive and if you actually look at the captive financing side, we have which is the easiest lever for them to pool is the one that is now pretty much normalized to how it was pre pandemic and so we're expecting that now the cash on the Hood component is the next one to come and this will be especially prevailing in the world where.
Ryan Meyers: Right like.
Ryan Meyers: Lots will start getting fuller and fuller and dealers need to obviously move their cars because otherwise they have real floor by floor plan financing issues and so net net is I think this will be a growing factor and it will continue to grow.
Ryan Meyers: And in a macro where dealers will have a hard time selling cars.
Ryan Meyers: Specially with affordability and these are these are programs that are very very effective and don't impact the residual value of the cars, which obviously for the Oems is really important so I.
Ryan Meyers: I'm very bullish on in this area.
Ryan Meyers: And the only thing I would add there is like I think the relevance of our.
Ryan Meyers: OEM incentive offering.
Ryan Meyers: <unk> is going to be stronger than it's ever been for the recent gentium, just mentioned, which is our ability to offer private targeted incentives.
Ryan Meyers: Protects.
Ryan Meyers: The Oems.
Ryan Meyers: Digital value and what we've seen over the past two years is that.
Ryan Meyers: Way more new car loans were originated by the captive arms and way more new car sales were were at least and so the captives.
Ryan Meyers: Effectively have these these.
Ryan Meyers: These loan books that are very susceptible to declining residual values and so I think theyre going to be very cautious when it comes to offering broad cash on the hood promotions or discounts because that could directly impact there.
Ryan Meyers: Their loan to values and so going forward I think our ability to incentivize demand with discounted cash rebates, but do it in a way that protects residual values is going to be more important over the next couple of years.
Ryan Meyers: And I think it's ever been and so I think that should favor.
Ryan Meyers: The product that we offer them.
Ryan Meyers: That's very interesting thank you.
Speaker Change: The next question comes from Marvin Fong from BTG. Please go ahead.
Marvin Fong: Oh, great. Thanks for taking my questions.
Marvin Fong: I know we've talked a lot about about OEM here I guess just to be a little more clear here you know, obviously, you highlighted Mercedes and their other partners potentially.
Marvin Fong: Who joined that AAA program so shall.
Shall we.
Marvin Fong: I didn't know you also mentioned the acceleration in the second quarter, but you know.
Marvin Fong: By sometime this year should should we.
Marvin Fong: That you will fully recaptured that.
Marvin Fong: Yeah.
Speaker Change: The lost American Express business, you just wanted to be clear on that and then maybe a second question I'm just love to kind of hear about from the dealer side, you know coming out or not.
Speaker Change: And whatnot just what's the pipeline in terms of dealers that you have a T C plus or are you pretty much have a pipeline of dealers ready to go once you. Once you do rollout into into new regions, maybe just kind of talk about that.
Speaker Change: That aspect of T C plus.
Speaker Change: Yeah. So I think the the first almost on the first the answer is yes, and I think really.
Speaker Change: Q1 is the is the only one where you have a little bit of a shift in I think in Q2, we should already start seeing that acceleration so.
Speaker Change: So I think that's number one.
Speaker Change: On the T C plus piece is yes, we have dealers already.
Speaker Change: We actually have dealers ready many different states that would love to put their hands up and we'd love to participate. We obviously wanted to do this relatively focus I will first do more dealers in California, and then we'll we'll start expanding in in other states. The two states that are highly likely to follow afterwards, we're gonna be floor.
Speaker Change: And Texas purely because of it.
Speaker Change: The density of dealers that we have in both in both these dates as well as obviously the car buying.
Speaker Change: Audience that exist in both states.
Speaker Change: And so net net this is a focus on California first yes, we have a pipeline ready, but we want to make sure that these experiences are really good. It's also require so we should get a little bit of a different mindset at the dealerships themselves would require some level of training et cetera.
Speaker Change: So we wanted to do this in a in a structured manner, but the answer is yes. We have plenty of dealers that are really excited and then also obviously we continue to work with really important partners of ours that include right. The dealer associations, the Oems et cetera. So as we scale. This we also wanted to make sure. We we take all of our stakeholders along because we feel we have a very unique.
Speaker Change: <unk> position in the markets and with the C plus and the product we deliver and so yeah. So we're very excited that they make as we as we made continuous progress on the product. We can start accelerating this and start accelerating this faster and faster and sue and make it much more impactful because I know we've been talking about it a lot.
Speaker Change: But I think this is a huge opportunity for us.
Speaker Change: But we're now in the final legs of really improving those experiences.
Speaker Change: Great. Thanks, so much John.
Speaker Change: The next question comes from Chris Harris from Needham. Please go ahead.
Speaker Change: Hey, good morning, I just wanted to go back to the first question and the Consultative approach I guess I'm, just trying to understand you're sending a dealer a lead.
Speaker Change: Where is sort of the ball being dropped or why do you need to kind of help them massage that lead into a satellite.
Speaker Change: I understand what kind of what's happening and what are you doing to kind of drive that conversion higher.
Speaker Change: Oh, I mean that like.
Speaker Change: I should have myself I should have my service team on Nicole because I would love to spend a couple of hours talking through this idea to assure that the short answer is a couple of things one is.
Speaker Change: It starts with do way you effectively position your own dealership on the marketplace right. So and like the price curve is a great example, right whether you are an excellent price for a good price for an average price of your car, making shortage you have active pricing on the platform, especially as prices change very.
Speaker Change: <unk> quickly and swiftly in the marketplace and is one example of something that's very simple they do theirs.
Speaker Change: Some dealers had don't really log into the system is very often as a result in a in a pricing changing world there their prices might become uncompetitive unknowingly to the dealer and as a result, they might have pretty dramatic drops in there and their lead generation, because frankly, they're they're they're pricing themselves out.
Speaker Change: The market not because they do that intentionally but because they haven't logged into the system recently as an example, so the active engagement with the tools is really important and then also the other pieces them do the way you'd nurtured elite and.
Speaker Change: You would be surprised to know that like if you're the head of sales or even a gem of a dealership you obviously have a lot of salespeople, but you also have a level salespeople turnover and so training these people and making sure that these people are really good at how they nurture these leads and what they do with them et cetera is something that.
Speaker Change: And Milt always happens the right way and many of the dealers and so our trainer coming in to help their sales folks effectively get to know the best in class of how to nurture lead how to bring it how to prioritize leads like what works and what doesn't work is really important there then.
Speaker Change: Added to that is for example, those new tools that we were describing where we're even like now with the AI tools determining right. The propensity of our lead to close or not to close and so now you can also start prioritizing debt within the dealership and then who knows what's and how does that work. So there is a lot that comes to actually.
Speaker Change: Selling a car and the more we help the dealers to stick here, we are and you would be surprised that the that it is relatively low hanging fruit for us to help them because very often it's very simple things, where if you do those things well they have dramatic impact on the <unk>.
Speaker Change: Close rates of these leads that we provide.
Speaker Change: Okay. Thanks for the detail there perfect and then.
Speaker Change: T CNS revenue down sequentially or is it too early to kind of gauge what's really going on there just kind of want to get a better understanding of that fact that you roll it out.
Speaker Change: Yeah, do you want to add.
Speaker Change: Over to you want me to take that or you want to take a god.
Speaker Change: Let me take a stab at it.
Speaker Change: Over quarter it was down.
Speaker Change: Lightly.
Speaker Change: And largely because we really focused Q4 on streamlining the offering right. So it's still sort of a suite of digital marketing products, but we really wanted to streamline the offering and simplify it in part because it is easier for dealers to understand and it's easier for the sales team.
Speaker Change: To sort of communicate the benefits of <unk>. So we really brought in some leadership on the Truecar marketing solution side and started to sort of build out the right team on that side. So I think Q4 was really about how do we strengthen our go to market muscle with gcs and led.
Speaker Change: But created a stronger foundation going into Q1.
Speaker Change: And so yes. It was it was a sequential decline, but I think it was it was sort of.
Speaker Change: Strengthening the go to market muscle, so that 2025, it'll it'll be a big growth driver of ours.
Speaker Change: Okay and is there a way to sort of quantify sort of upper bound like what are we talking about a charge growth either whether in terms of absolute revenue and revenue growth like what's the right way to think about the trajectory of this over the year and next couple of years et cetera.
Speaker Change: And then I'd say, it's a little early to tell.
Speaker Change: We're incredibly optimistic about it just because.
Speaker Change: The amount that franchise dealers spend on digital marketing off of the Truecar platform.
As is astronomical right and so there's a huge addressable market there for us.
Speaker Change: That allows us to capture parts of their budget.
Speaker Change: That aren't going to third party listing sites, but are going to Google or meta.
Speaker Change: And so our belief is that it could be a very sizable component of our overall revenue, but it's a little early for us to predict what percent that might be.
Speaker Change: So hopefully we'll have much better sense for that over the next couple of quarters.
Okay, Great I appreciate the time thanks.
Speaker Change: Okay.
Speaker Change: This concludes our question and answer session I would like to turn the conference back over to Jensen for closing remarks.
Speaker Change: Alright, I would like to thank everybody for taking the time to participate in our call today.
Speaker Change: I also want to thank the team for all their continued efforts were a more focused and more disciplined than we've ever been.
Speaker Change: And so with gratitude.
Speaker Change: U S.
Speaker Change: And look forward to the next call.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.